Bureaucratic bloating in health? Oz figures ‘meaningless’

By David Donaldson

Friday April 29, 2016

Western Australia has Australia’s most efficient hospital system and Victoria and Queensland have plenty of fat to cut, according to the front page of The Australian. But former bureaucrats tell The Mandarin the analysis is based on misleading figures.

There are more than twice as many administrative staff for every hospital bed in Queensland as there are in Western Australia, the report states, which contends the number of bureaucrats is bloating budgets around the country. The ratios cited vary considerably across the nation: while there are a highly efficient 6.8 hospital beds per bureaucrat in Western Australia, Tasmania has 4.6, New South Wales 4.4, Victoria a fairly low 3.6 and Queensland a sluggish 3.

This bloating is evidence of a need to cut, the broadsheet quotes the Centre for Independent Studies’ Jeremy Sammut as saying:

“State governments are in the thrall of the public sector health unions and don’t have the political will to be able to cut the fat by undertaking long-overdue structural reforms and getting leaner, more efficient private operators to run hospitals.”

Extraordinary stuff — except that the figures are “all but meaningless”.

As the Oz story itself quietly notes — towards the end, on page 6 — the figures it splashed across its front page aren’t really comparable because of the way each state structures its health system. The differences can be quite considerable, argues former health bureaucrat and academic Tom Keating.

“NSW, for instance, directly employs all staff while Victorian hospitals employ their own staff. So an administrative assistant or a manager in a NSW hospital appears in the state ‘bureaucrat’ figures while in Victoria, they do not,” he explained to The Mandarin.

“The health systems of the states are so different, in terms of their functions and their structures, that this is not comparing like with like.”

The story is especially curious given that a report released by the National Health Performance Authority only yesterday gave a vastly different picture of efficiency in the health system. Comparing individual hospital running costs with the cost of care, it found that — rather than Victoria getting bad marks and WA being the model child — every one of Australia’s most efficient 10% of hospitals is Victorian, while several of the top 10% most expensive are in Western Australia.

Keating added that differences in service delivery responsibilities between states also made it difficult to directly compare costs.

“State health bureaucrats do more than oversee hospitals. They have responsibility for public health, mental health, primary health care and in some cases aged care. This varies from state to state and also varies with respect to how these functions are weighted,” he said.

“SA has for instance largely abandoned primary care to the Commonwealth. This will be reflected in their employment figures.”

Grattan Institute health expert Stephen Duckett — who is quoted in the story — told The Mandarin: “You should take those figures [cited in The Australian] with a huge grain of salt … as I said to the journalist, it’s really hard to be comparable.”

The former secretary of the federal Department of Health told the paper it was difficult to draw conclusions from the data referenced:

“Is the clerk in the ward of a hospital part of administration or part of patient services? What is certain is there is a lack of consistency of data in this area; this is a problem in itself.”

Graph from The Australian's story
Graph from The Australian‘s story

Victorian hospitals ‘obviously more efficient’

Duckett agrees with the NHPA’s findings that Victorian hospitals are “obviously” more efficient than any other state. The key to Victoria’s success is that it has been using activity-based funding for the past 20 years, which is quite effective at driving efficiency improvements, while other states have only started moving in this direction more recently.

Andrew Podger, former secretary of the Department of Health and Aged Care, concurs The Australian story is based on “extraordinarily simplistic analysis, even if it is quite valid to look for ways to constrain overhead costs and to concentrate resources on service delivery”.

Using hospital beds as a proxy for service delivery “is clearly inappropriate when we are trying to improve primary health care and community aged care, in part to reduce pressure on hospitals”, he tells The Mandarin.

“Even within the acute care area, no one focuses on costs per bed …”

“Even within the acute care area, no one focuses on costs per bed, but on casemix methodologies based on costs per episode of care,” he said.

He also took issue with the paper’s “attack on the Commonwealth based on its not actually running hospitals”.

This, he says, “ignores the many roles the Commonwealth plays, not only in running the Medicare Benefits Scheme and Pharmaceutical Benefits Schedule, but in a range of regulatory activity such as the Therapeutic Goods Administration and in purchasing and overseeing the whole field of aged care, both residential and community-based, and promoting preventative health measures.

“These attacks also only play into the hands of those who are in fact behind the more serious cost drivers in the health system — supply-driven demand and over-priced services and products, and poor linkages between the different parts of the system.

“None of this is to defend excessive bureaucracy and a number of measures by some states in recent years, such as NSW, to strengthen hospital governance and to reduce central bureaucracies have been very sensible.”

Keating also said he thought the paper’s argument that the federal health bureaucracy had grown at “more than double the rate of national employment growth” appeared to be “misleading”, and that it was probably due to machinery of government changes.

“There has been from 2013 a large reduction in particular branches of the health bureaucracy. The increase may be related to the transfer out and then back in of the aged care responsibilities.”

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